John Molson School of Business

Department of Accountancy
ACCO 320 – Financial Reporting II
Prof. Trevor Hagyard, Dr. Kelly F. Gheyara
Midterm Examination, Fall 2013
Friday, October 18, 2013

Student Name:____________________________ Student ID:_________________ Section:________

Estimated time Marks

Question I Multiple Choice 45 minutes 30 Marks

Question II Liabilities 72 minutes 25 Marks

Question III Shareholders’ Equity 40 minutes 23 Marks

Question IV Complex Financial Instruments 23 minutes 22 Marks

TOTAL 180 minutes 100 Marks

Instructions:

1. Make sure you put your name, student ID, and section above on this exam booklet as well as on
each answer booklet you use. There are 4 Questions and 12 Pages.

2. ANSWER QUESTION I IN THIS QUESTION BOOKLET. ALL OTHER ANSWERS must

be written on the ANSWER BOOKLET and their number clearly stated. Answers written
elsewhere or unmarked answers will not be marked.

3. There is partial credit available on ALL Questions and so please make sure you show ALL your
work and computations.

4. Allocate your time wisely…You have 3 hours to complete this exam. You MUST STOP all your
work and turn in the exam when the invigilator declares the examination ended.

5. You MUST return (1) this exam booklet document, and (2) your answer booklet/s. Failure to
do so will invoke penalty.

READ EACH PROBLEM AND THINK CAREFULLY.

GOOD LUCK!! WE WISH YOU ALL WELL!

Page 1
 QUESTION I - Multiple Choice - 30 Marks

INSTRUCTIONS: Write your answers to THIS QUESTION on THIS BOOKLET ONLY.

Answers written anywhere else WILL NOT BE GRADED. Attempt ALL Questions.

Circle the alphabet corresponding to the one single statement which best answers each question.
Multiple markings on any question will be marked as an incorrect response. Your answers must be
based on IFRS unless otherwise indicated or stated.

Use the following information to solve Questions 1 and 2.

GCC Computer Systems Inc. maintains office equipment (photocopiers and computers) under
contract. The contracts are issued for durations of one year, two years and three years respectively.
These contracts for labour only and customers must reimburse GCC for parts. The number of new
maintenance agreement sold in 2013 and its rate schedule is as follows:
1-year 2-year 3-year
Photocopiers $240 $420 $600
Number of agreements 24 12 36
Computers $180 $320 n/a
Number of agreements 24 24 0

Assume that the contract sales occurred even during the year. Thus in the current year, on a one-year
contract, on average, 50% revenue would accrue. Similarly, on a two-year contract, on average 25%
revenue would accrue; and so on.

1. Determine the amount of revenue that GCC will recognize for the year ended December 31, 2013.
a. $22,200 b. $11,820
c. $23,640 d. $10,800
e. none of the above but $ .

2. What amount of deferred revenue will GCC report as total liability (both current and non-current) at
the end of 2013?
a. $32,580 b. $22,200
c. $20,760 d. $34,320
e. none of the above but $ .

3. Aaron Robinson Architects, Ltd. (ARAL) is a private company that reports its financial results in
accordance with ASPE. Unfortunately, a three-storey apartment building that ARAL designed
recently collapsed. The owners of the apartment complex are suing ARAL for $10 million in
damages. ARAL’s legal counsel estimate that the plaintiff has an 80% likelihood of success and that
if successful, the litigants will be awarded $6 million to $8 million with all payouts in the range being
equally likely. ARAL’s $5 million protected errors and omissions liability insurance policy includes a
$500,000 deductible clause. The appropriate accounting treatment for this situation would lead to:
a. a loss of $600,000 being reported as footnotes.
b. a $500,000 gain to be recorded.
c. a $1,400,000 loss to be accrued.
d. a $1,000,000 loss to be accrued.
e. none of the above but either 1 MM OR 1.5MM .

Page 2
4. On January 1, 2014, GT Transmission Services Co., issued a $20,000, non-interest bearing note due
on January 1, 2015, in exchange for a custom-built computer system. The fair value of the computer
system is not easily determinable. The market rate of interest for similar transactions is 4%. GT’s
year-end is December 31.
How much interest expense would GT recognize for its 2014 year on this transaction and how much
would be the year end balance of the note payable, respectively?
a. $0; $20,000 respectively. b. $769; $20,000 respectively.
c. $800; $20,000 respectively. d. $800; and $20,800 respectively.
e. none of the above but $ .

5. A company using IFRS, issues convertible bonds between interest payment dates with face value of
$6,000,000 and receives proceeds of $6,540,000. Each $1,000 bond can be converted at the option of
the holder into 40 common shares. The underwriter estimated the market value of the bonds alone,
excluding conversion rights, to be approximately $6,200,000. Accumulated interest paid by the
holder on issuance of the bonds was $$50,000. The appropriate journal entry on issuance of these
bonds would be:
a. DR Cash $6,590,000; CR Bonds payable $6,540,000; CR Interest payable (or Interest expense)
$50,000.
b. DR Cash $6,590,000; CR Bonds payable $6,000,000; CR Contributed surplus $540,000;
CR Interest payable (or Interest expense) $50,000.
c. DR Cash $6,590,000; CR Bonds payable $6,200,000; CR Contributed surplus $340,000;
CR Interest payable (or Interest expense) $50,000.
d. DR Cash $6,540,000; CR Bonds payable $6,200,000; CR Contributed surplus $340,000.
e. none of the above .

6. On June 18, 2013, Railway Inc., a public company, issued 30,000, $4 cumulative preferred shares for
$102 per share. Each preferred share could be converted into 5 common shares at the option of the
preferred shareholder. On June 18, 2013, similar non-convertible preferred shares were selling for
$100 each. On August 17, 2016, 50% of all of the preferred shares were converted into common
shares. The market value of the common shares at date of conversion was $30 per share. The journal
entry to record the conversion into common shares would include:
a. debit to preferred shares of $3,060,000.
b. debit to preferred shares of $3,000,000.
c. credit to contributed surplus- conversion of $30,000.
d. credit to common shares of $2,250,000.
e. credit to common shares of $1,530,000.

7. Quebec Jetski Corp. sold motorized watercraft starting in 2013. Quebec Jetski includes a three year
warranty on each watercraft they sell. Management estimates that the revenue portion associated with
the sale for the warranty was 6.5% of revenue and that the cost of providing the warranty coverage is
2% of sales in the first year and 1% of sales in each of years two and three. Other facts are:
- Quebec Jetski Corp. reported sales for 2013 of $4,800,000 evenly throughout the year and uses the
revenue approach in recording warranty related transactions;
- The cost to meeting the warranty claims in 2013 was $120,000 including $100,000 parts and
$20,000 labour
For 2013, the amount of warranty revenue and expense to record for Quebec Jetski Corp would be:
a. revenue $312,000; expense $192,000. b. revenue $192,000; expense $120,000.
c. revenue $195,000; expense $120,000. d. revenue $195,000; expense $192,000.
e. revenue $104,000; expense $120,000.

Page 3
8. Really Really Cheap Vacations Ltd. (RRCV) issued $4,000,000 of 5 year, 4% bonds dated January 1,
2011 with interest payable January 1 and July 1 each year. The proceeds realized from the bond issue
was $3,900,000 less $50,000 in bond issue costs. RRCV year end is December 31 and it uses ASPE
with straight line amortization of bond premium/discounts, and values bonds at amortized cost on its
financial statements.
At December 31, 2014, what is the amortized cost of the bonds payable on RRCV’s balance sheet?
a. $3,970,000. b. $4,000,000.
c. $3,980,000. d. $3,900,000.
e. none of the above but $ .

9. Nationair Inc. owes the Bank of Universal Debt [BUD], 6% interest, $5,000,000 as at its fiscal year
end on December 31, 2013, which is due in annual payments of $1 million over the next 5 years -
payment dates are June 30. On March 14, 2014, Nationair Inc. issued $2 million in 5% preferred
shares which are not callable or redeemable. It states that some of the proceeds will be used to pay
the next debt installment due to the BUD and places $1million into an irrevocable bank account for
that purpose. How would the $5 million in debt due to BUD be classified on the balance sheet at
December 31, 2013 assuming the financial statements will be issued on March 31, 2014 and
Nationair Inc. uses ASPE versus IFRS?
a. ASPE and IFRS- $1 million current and $4 million long-term.
b. ASPE and IFRS- $5 million long-term.
c. ASPE- $5 million long-term; IFRS- $1 million current and $4 million long-term.
d. ASPE and IFRS- $2 million current and $3 million long-term.
e. ASPE and IFRS- $3 million current and $2 million long-term.
f. none of the above but ASPE and IFRS- $ ; and $ .

Use the following information to answer Questions 10 and 11.

On January 1, 20X1, Higgins, Inc., reported 52,000 common shares, outstanding, at $1,092,000 plus
retained earnings of $250,000. On March 1, it issued 8,000 additional shares in exchange for
equipment with a fair market value of $258,000. The shares were being traded on the market at
$33.00 each. On April 30, the company declared a 2-for-1 stock split. On October 1, it purchased in
the open market, 16,000 shares at $10.50 each and cancelled them. On December 31, it declared a
cash dividend of $1.20 per share and reported a net income of $132,000. The company follows IFRS
for its accounting.

10. Determine the number of shares outstanding and dollar capital that Higgins will report on its balance
sheet dated December 31, 20X1.
a. 120,000 shares; $1,350,000. b. 104,000 shares; $1,170,000.
c. 104,000 shares; $1,530,000. d. 164,000 shares; $1,230,000.
e. none of the above, but $ .

11. Determine the balance of Retained earnings reported by Higgins on its balance sheet dated December
31, 20X1.
a. $169,200. b. $145,200.
c. $125,200. d. $137,200.
e. none of the above but $ 157,200 .

Page 4
12. Riviere-Rouge Wheels Inc. (RRW) sold $5,000,000 of five year, 6% bonds at par on January 1, 2012
with interest payable January 1 and July 1 each year. The bonds can be called at anytime at 101 plus
accrued interest. On April 1, 2013 RRW bought back $1,000,000 of bonds on the open market for
$984,736 including accrued interest and retired them. The gain or loss on retirement of these bonds
on the retirement date would be:
a. gain of $15,264. b. loss of $15,264.
c. gain of $25,264. d. gain of $30,264.
e. none of the above, but $ .

13. Zound Box, Inc., uses the revenue approach to account for warranties. During 2012, the company
sold a special stereo equipment to the Montreal Art Centre for $500,000 and carrying a two-year
warranty (included in the price). It was estimated that 3% of the selling price represented warranty
revenues. Further, 60% of this revenue related to 2012, and the balance was allocated to the
following year. Assume that Zound Box incurred costs of $4,700 to service the contract in 2012.
Determine the warranty revenue, the unearned warranty revenue and the warranty expense reported
by Zound Box in its 2012 financial statements.
a. Warranty Revenue - $15,000; Unearned Warranty Revenue - $15,000; Warranty Expenses -
$4,700.
b. Warranty Revenue - $15,000; Unearned Warranty Revenue - $15,000; Warranty Expenses -
$9,400.
c. Warranty Revenue - $9,000; Unearned Warranty Revenue - $9,000; Warranty Expenses - $9,400.
d. Warranty Revenue - $9,000; Unearned Warranty Revenue - $15,000; Warranty Expenses - $4,700.
e. none of the above, but Warranty Revenue - $ 9,000 ; Unearned Warranty Revenue - $
6,000 ; Warranty Expenses - $ 4,700 .

14. Assume that a convertible bond issue with a par value of $350,000 , remaining unamortized premium
of $44,900 and a balance of $90,000 in the Contributed Surplus - Conversion account is converted
according to the terms of the bond indenture, by issuing 18,000 common shares. The shares, with an
average cost of $15, were currently being traded in the market at a price of $21 each. What is the
amount of gain or loss to be recorded on this transaction?
a. No gain or loss is to be recorded. b. $39,000 gain.
c. $5,000 gain. d. $49,000 loss.
e. None of the above but $ .

15. On October 1, 2011, Souvenirs Company issued $6 million face-value debentures. The bonds have a
coupon interest rate of 10% per annum, payable semi-annually on 31 March and 30 September, and
mature on 30 September 2021. The bonds were issued at a price to yield 8%. The issue price of the
bonds would have been
a. $2,738,340. b. $2,779,140.
c. $6,805,188. d. $6,815,440.
e. None of the above but $ .

Page 5
SOLUTION I - 30 Marks

1. Soln: 240*0.5*24 + 420*0.25*12+ 600*0.166667*36+180*0.5*24+320*0.25*24 = 11,820

2. Soln: total rev= 44,400 less def rev 11,820 = 32,580

3. Soln: 6MM loss exceeds coverage of 5MM. Thus loss recorded at difference of 1.0 MM.
However could be interpreted that the 500K deductible is part of the 5MM coverage, i.e., the
insurance pays only 4.5MM. Then the answer could be 1.5 MM. Both answers acceptable.

4. Soln: $20,000/1.04 = $19,231, thus interest expense is 20,000-19,231 = 769 and note payable
20,000

5.

6. Soln: initial issue (dr) CASH 3060k, (CR) PREF 3000K; (CR) CONT SURPL 60k then on
conversion of half: (dr) preferred shares 1500k, (cr) cont surplus 30K, (cr) common shares 1530K

7. Soln: revenue = 0.065*4.8mm * 120 actual/192exp cost =195K, expense is actual = 120K.

8. Soln: amortized cost based on proceeds of $3850K, discount = 150K, amortized 30K per year. 2014=
4 years amortization, thus 4*30K + 3850K = 3970K

9.

10. 52K $1,092K

8K 258K
Stk Spl 120K $1,350K
(16K) (180K)
104K $1,170K

11. 250 + 132 - 124.8 = 157.2K

12. Soln: accrued interest = 3/12*0.06*1MM = $15,000, and other gain on redemption at lower than issue
price of $15,264, thus total gain = $30,264.

13. 0.03 x 500K x 0.6 = 9K; 0.03 x 500K x 0.4 = 6K; 4.7K

14.

15. PV of Single Amount, $6,000,000 [4%, 20 Periods] $2,738,340

[6,000,000 x 0.45639]
PV Of Ordinary Annuity, 300,000 [4%, 20 Periods] $4,077,100
[300,000 x 13.59033]
Issue Price $6,815,440

Page 6
 QUESTION II - Liability Transactions - 25 Marks

Transaction I - 12 Marks

The following situation sums up a debt restructuring and you are required to help out with the case.

Situation:

On December 31, 2013, KFG owed TRH Bank $4,000,000 on a loan payable. Interest is 5% per annum
and had been paid for 2013. TRH Bank agreed to allow KFG to satisfy their entire obligation by
repaying the loan in 3 equal instalments of $1,100,000 starting on December 31, 2014 but to pay 8%
interest on outstanding amounts. The market rate of interest is 6%.

REQUIRED:

1. Firstly, determine if the revision to the debt on December 31, 2013, should be accounted for as a
settlement (major restructure), or as a modification (minor restructure) of the old debt. Show clearly
your computations to support your answer.

2. Prepare the journal entry, in proper form at, to record the transaction in the books of the debtor, KFG.

3. Similarly, prepare the journal entry, in proper form at, to record the transaction in the books of the
creditor, TRH Bank.

4. On December 31, 2014, prepare the journal entry to record the debt transaction in the books of
- KFG
- TRH Bank

5. For This Question Only, assume that your computations, in (1) above, involving the cashflows for
the loan, amounted to a present value of $3,782,000. Now determine if the revision to the debt on
December 31, 2013, should be accounted for as a settlement (major restructure) or as a modification
(minor restructure) of the old debt. Give brief but clear reasons to support your answer.

Page 7
Transaction II - 13 Marks

Alumin, Inc., constructed and commenced the operations of a large aluminum smelting factory on
land donated by the provincial government on January 1, 2013. The construction and required
equipment carried a total cost of $98 million with an expected life of 20 years. The conditions
specified by the government required the company to remove all equipment then existing, and
thereafter renovate and convert the premises into a museum to house aerospace artifacts. The total
costs of such a restoration was expected to be not less than $30 million and which was to be
accounted for appropriately. Alumin expected to recover $8 million from the sale of the scrapped
equipment at the end of its useful life.

The company was also advised by its construction consultants that it would incur additional
restoration costs, for the first three years only, due to production related issues in those years. These
additional costs, amounting to $3.1 million annually were to be accrued at the beginning of the year.
Further, these will also be paid in total ($9.3 million) when the equipment would be removed.
Alumin has settled on an annual discount rate of 3%.

On January 1, 2033, the company commissions Reliance Restorators, Inc., to dismantle and remove
the equipment, and clean up the site and makes a total payment of $39 million.

Required:

Prepare all appropriate entries (under IFRS unless specifically mentioned otherwise), to record the
following:

a] The costs associated with the asset restoration obligation on January 1, 2013 upon the acquisition of
the plant on January 1, 2013.

b] The additional restoration costs during production for the year, ending December 31, 2013.

c] The depreciation expense for 2013 to be recorded on December 31, 2013.

d] The finance costs on the outstanding liability for the period ended December 31, 2013.

e] Now assume PE GAAP. The additional restoration costs during production for the year, ending
December 31, 2013.

f] The payment for the dismantling and cleanup contract on January 1, 2033.

Page 8
 SOLUTION: QUESTION II - 25 Marks
Transaction I (12 Marks)

1. Situation A- principal = 1.1MM* PVIF1, 5% + 1.1MM*PVIF2,5%+1.1MM*PVIF3,5%

=1.1MM *.9524 + 1.1 MM * .9070 + 1.1MM * .8638 = 2.995575MM
-interest = 3.3MM * 8% * .9524 +2.2MM * 8% * .9070 + 1.1MM *8%*.8638 = 487.083K
-total = 3.482658MM, thus is more than 10% lower than $4 million, major debt restructure and so
would be a settlement of the original debt.

2. Loan Payable - Old 4,000K

Loan Payable - New 3,419,907
Gain on Restructuring of Debt 580,093
New is valued at 6% for the borrower, thus
principal = 1.1MM* PVIF1, 6% + 1.1MM*PVIF2,6%+1.1MM*PVIF3,6%
=1.1MM *.9434 + 1.1 MM * .89 + 1MM * .83962 = $2,940,322
+ interest = 3.3MM * 8% * .9434 +2.2MM * 8% * .89 + 1.1MM *8%*.83962 = 479,585
= $3,419,907

3. Bad Debt Expense 517.35K

Loan Receivable 517.35K
[4,000K - 3,482.65K]

4. KFG
Interest expense [0.06*3,419,907] 205,194
Loan Payable 58,806
Loan Payable 1,100K
Cash [1.1M +264] 1,364K

TRH
Cash [.08 x 3.3M] 1,364K
Interest revenue [0.05 x 3,482,658] 174.133K
Loan Receivable [Balance] 1,189.867K

5. Given - Total = 3,782K, is less than 10% lower than $4MM, thus minor debt restructure and so
would be a modification or exchange of the old debt.

Page 9
Transaction II - (13 Marks)

a] To record the costs associated with the asset retirement obligation:

[The present value of $30 million due in 20 years at 3% per year discount rate]
30,000,000 x 0.55368 = $16,610,400

Equipment 16,610,400
Asset Retirement Obligations 16,610,400

b] To record the additional restoration costs related to the production process and the asset
retirement obligation at December 31, 2012:
[Present value of estimated clean up costs of $1,500,000 at 3% per year in 20 periods]
$3,100,000 x 0.55368 = $1,716,408.

Production Overhead Costs 1,716,408

Asset Retirement Obligations 1,716,408

c] The depreciation expense for 2012 on the total equipment to be recorded on December 31, 2012.
[$90M + $16,610,400]/20 Periods = $5,330.520

Depreciation Expense 5,330.520

Accumulated Depreciation – Equipment 5,330,520

d] The finance (interest) costs for 2012 on December 31.

Interest Expense 549,804

Asset Retirement Obligations 549,804
[0.03 x (16,610,400 + 1,716,408)]

e] Now assume PE GAAP. The additional restoration costs during production for the year,
ending December 31, 2012.

Equipment 1,716,408
Asset Retirement Obligations 1,716,408

g] The payment for the dismantling and cleanup contract on July 1, 2021.

Asset Retirement Obligations 39,300,000

Cash 39,000,000
Gain on Settlement of ARO 300,000

Page 10
 QUESTION III - Shareholders’ Equity - 23 Marks

HardVood Corp. is authorized to issue 800,000 no par value common shares. Subscribers, on January 1,
20X1, are allocated to purchase 200,000 common shares at $15 per share and required a 40% down
payment. On April 1, the company calls the remaining subscription amount due. Subscribers for 8,000
share subscribers fail to pay on the instalment and the company confiscates their earlier contributions. On
May 1, the company issues the shares to the fully paid subscribers.

On June 1, the company issues 8,000 in exchange for land with a fair market value of $160,000. On June
30, it repurchased 50,000 shares at $16.80 and cancelled them. Thereafter, on July 15, it declared a ten
percent stock dividend. The market price of the company’s shares on that date was $15.40. Share
certificates were distributed one month later.

On January 1, 20X1, the company carried an opening balance of $115,000 in its Contributed Surplus-
Shares repurchase account. Further, the company had no remaining shares outstanding on that date.

REQUIRED: Prepare the entries to record all of the transactions listed above, as follows:

a. Entry/entries on January 1.

b. Entry on April 1 for the subscriptions received.

c. Entry on April 1 to record the default of the subscribers on their share subscriptions, assuming the
company confiscates all prior contributions.

d. Entry on May 1.

e. Entry on June 1 for the land received.

f. Entry on June 30 to record the repurchase and cancellation of the repurchased shares.

g. Entry on July 15, if required, to record the stock dividends declared. If no entry is necessary, clearly
state so.

h. Entry on August 15, if required, for the share certificates issued. If no entry is necessary, clearly state
so.

Page 11
 SOLUTION III - 23 Marks

(a) Subscriptions Receivable (15 x 200,000) 3,000,000

Common Shares Subscribed 3,000,000

Cash (0.40 x 3,000,000) 1,200,000

Subscriptions Receivable 1,200,000

(b) Cash (192,000 x $15 x 0.6) 1,728,000

Subscriptions Receivable 1,728,000

(c) Common Shares Subscribed (15 x 8,000) 120,000

Subscriptions Receivable (0.6 x 15 x 8,000) 72,000
Contributed Surplus - Forfeited Subscriptions 48,000

(d) Common Shares Subscribed 2,880,000

Common Shares (15 x 192,000) 2,880,000

(e) Land 160,000

Common Shares 160,000

(f) Common Shares [*15.20 x 50,000] 760,000

Contributed Surplus- Shares repurchase 80,000
Cash [16.80 x 50,000] 840,000
*[(3,040K/200K)]

(g) Retained Earnings [0.1 x 150,000 x 15.40] 231,000

Common stock Dividends Distributable 231,000

(h) Common stock Dividends Distributable 231,000

Common Shares 231,000
[FMV of Common Shares is $15.40 each]

Page 12
 QUESTION IV - Complex Financial Instruments - 22 Marks

Tweaker, Inc., is a social media corporation and has opted to follow IFRS. It issued 25-year 8% bonds
with a maturity value of $300,000 on 1/1/X0. 3 warrants were attached to each $1,000 bond. Each
warrant entitled its holder to purchase one common share in Tweaker at $130 each. Based on a market
based expected yield of 10%, the company priced the bonds only at $253,884. The market value of the
warrants on the date of the issue was $27 each.

On March 31, 20X5, when the market price of Tweaker’s shares reached $180, 70% of the warrant
holders exercised their options to purchase shares in the company. Thereafter on December 31, 20X8,
when the market conditions seemed favourable, the company called in 30% of the outstanding bonds at
105 and cancelled them.

The recorded balance of the bond discount on June 30, 20X8 was $28,182. Similarly on December 31,
20X8, the balance was $26,589 and $24,918 on June 30, 20X9.

REQUIRED:

1. Prepare the appropriate journal entry, in proper form at, to record the issue of the bonds on January 1,
20X0. (4 marks)

2. Prepare the appropriate journal entry on June 30, 20X0, in proper form at, to record all effects
pertinent to the bonds. (4 marks)

3. Determine the interest expense recorded for the year 20X0. (4 Marks)

4. Prepare the appropriate journal entry, in proper form at, to record the exercising of the warrants on
March 31, 20X5. (5 marks)

5. Prepare the appropriate journal entry, in proper form at, to record the retirement of the bonds on
December 31, 20X8. (5 marks)

Page 13
 SOLUTION IV - 22 Marks

1. Cash 278,184
Bonds Payable 253,884
Contributed Surplus - Warrants 24,300
[300 x 27 x 3]

2. Interest Xp [253,884 x.05] 12,694

Cash [.04 x 300,000] 12,000
Bonds Payable 694

3. 12,694 (as above) + (.05 x(253,884 + 694) )

12,694 + 12,729 = 25,423

4. Cash [3 x 100 x 130 x 0.7] 81,900

Contributed Surplus Warrants 17,010
[0.7 x 24,300]
Common shares 98,910

5. Bonds Payable 82,023

[(300,000 - 26,589) x 0.3]
Loss on Retirement of Bonds 12,477
Cash (300,000 x 0.3 x 1.05] 94,500

Page 14